Statutory Maternity Pay (SMP) is paid through the employer’s payroll exactly like normal salary — subject to income tax via PAYE, Class 1 National Insurance, student loan repayments, and pension contributions. The interaction creates four practical effects that catch employees off-guard during and after the 39-week SMP period.
For the SMP rate and eligibility rules, see SMP Rate 2026-27 UK.
1. SMP is taxable income — but tax code may auto-adjust
PAYE applies SMP at the employee’s existing tax code in the same way as regular salary. For an employee on the standard 1257L code with no other complications, the personal allowance (£12,570 in 2026-27) is spread across all 52 weeks of the tax year — and the cumulative tax basis means each pay packet’s tax depends on year-to-date totals, not just that week’s pay.
The mid-year tax code adjustment
Under a normal cumulative code such as 1257L, each payslip works out tax on your pay for the whole year to date against the allowance built up to date. When your pay drops during maternity leave, the cumulative calculation therefore corrects itself pay period by period: tax from the earlier, higher-paid months is netted off against the lower SMP weeks, so there is usually no large year-end refund. A refund or underpayment appears mainly if you were on a non-cumulative (W1/M1) or wrong code, or have other income, in which case HMRC may issue a revised code or a P800.
Year-end refund pattern
A typical example: an employee earning £40,000/year (AWE = £40,000 ÷ 52 = £769.23/week; 90% AWE = £692.31/week) goes on maternity leave 1 July 2026.
- April-June 2026: Normal salary at £40,000 × 3/12 = £10,000. Cumulative PAYE tax to the end of June is (£10,000 − £3,142.50 of allowance to date) × 20% = £1,371.50.
- July-March 2027 (39 weeks of SMP): £692.31/week × 6 weeks + £194.32/week × 33 weeks = £4,154 + £6,412 = £10,566.
- Total taxable income 2026-27: £20,566.
- Income tax owed at 2026-27 rates: £7,996 (£20,566 − £12,570 PA) × 20% = £1,599.
- Because PAYE is cumulative, the tax deducted over the year ends up at about this £1,599, with the earlier months’ tax netted off against the lower SMP weeks. A year-end refund is only likely if the employee was on a non-cumulative or incorrect code.
2. Class 1 National Insurance — paid on SMP at normal rates
SMP is subject to the same Class 1 employee and employer NI as regular salary:
- Employee Class 1 (primary): 8% on earnings above £12,570 / year (or proportionally per pay period).
- Employer Class 1 (secondary): 15% on earnings above £5,000 / year (or proportionally) — Autumn Budget 2024 changes effective April 2025.
For a £40,000 salary going on SMP:
| Pay component | NI implications |
|---|---|
| Pre-leave salary (April-June, 13 weeks) | Normal NI both sides. |
| Weeks 1-6 SMP (90% AWE = ~£692/week) | NI at normal rate; both employer and employee. Material because still above NI threshold. |
| Weeks 7-39 SMP (£194.32/week = below NI threshold) | Below the £242/week primary threshold. Zero employee NI. Employer NI still due above £96/week (secondary threshold) — so employer pays NI but employee does not. |
The NI gap during weeks 7-39 is a small benefit to the employee — about £15-25/week of NI saved depending on salary. This is one reason take-home pay holds up better than the headline SMP cut suggests.
3. Pension contributions during SMP — the asymmetric mandate
UK auto-enrolment rules (Pensions Act 2008) require employers to maintain pension contributions during maternity leave as if the employee were still receiving normal salary. This is the asymmetric pension mandate:
| Party | Contribution during SMP |
|---|---|
| Employee | Based on actual SMP received (e.g., £194.32/week — small contribution). |
| Employer | Based on pre-leave normal salary (e.g., £40,000/year — full contribution as before). |
So an employee on £40K base, with 5% employer contribution and 5% employee contribution, sees during the SMP period:
- Employee contribution: £194.32 × 5% = ~£9.72/week
- Employer contribution: £40,000 ÷ 52 × 5% = ~£38.46/week
The employer contribution is 4x the employee’s contribution during SMP — a significant tilt of the pension funding burden during this period. Employees should not stop their contributions during SMP unless they want to break the symmetric matching incentive in normal periods.
This asymmetry is statutory and the employee cannot opt out without losing the auto-enrolment status; the employer cannot reduce their contribution without similarly losing it.
4. Keeping in Touch (KIT) days
GOV.UK says an employee can work up to 10 days during maternity leave. These are called “keeping in touch” (KIT) days. They are optional, and both the employee and the employer need to agree to them.
The type of work and the pay for a KIT day should be agreed before the employee comes in. Pay for a KIT day is not set by statute, so check what your employer has agreed in writing before you rely on a figure.
GOV.UK also says taking KIT days does not affect the employee’s right to maternity leave and pay, so SMP is not reduced because of them. Pay agreed for a KIT day is earnings from the employer, so run it through payroll like any other pay; the Take-Home Pay Calculator shows how extra pay in a period is taxed.
5. Student loan repayments during SMP
If an employee is repaying a student loan via PAYE:
- During the first 6 weeks (90% AWE, often above the repayment threshold): repayments continue at normal rate (9% above the threshold).
- During weeks 7-39 (SMP at £194.32/week = below all student loan thresholds): zero student loan repayments.
The 33-week pause in student loan repayments is a structural feature, not an error. It can save several hundred pounds in student loan repayments during a single maternity leave, depending on salary and plan.
6. Holiday accrual and the post-return holiday cliff
Statutory holiday entitlement (5.6 weeks/year for full-time) continues to accrue throughout the 52-week leave. A 12-month full leave accrues 5.6 weeks of holiday during the leave itself — typically taken in the months after return.
Most employees return to work with 5-6 weeks of accrued unused holiday. This can be:
- Taken immediately on return (extending the effective return-to-work date).
- Used as part of a phased return (3 days a week for the first 6 weeks).
The accrued holiday is paid at full normal salary, not SMP rate. For high-earners, this is the single largest income event in the year following maternity leave.
7. SMP and the £100,000 personal allowance taper
For employees earning above £100,000, the personal allowance phases out by £1 per £2 of income above £100,000. SMP-period earnings dropping below £100,000 may temporarily restore some personal allowance — but the recalculation is done on the full-year basis.
For a £130,000/year employee taking 6 months (26 weeks) of SMP (AWE = £130,000 ÷ 52 = £2,500/week; 90% AWE = £2,250/week, well above the £194.32 statutory cap):
- Pre-leave (6 months): £65,000 of normal salary at £130,000 annualised → expecting £30,000 of PA phaseout (back to £0 PA).
- SMP for those 6 months: first 6 weeks at 90% AWE uncapped (£2,250 × 6 = £13,500) plus the remaining 20 weeks at the £194.32 statutory cap (£194.32 × 20 = £3,886.40) = £17,386.40 of SMP.
- Total taxable income: £82,386.40. Personal allowance fully restored (£82,386.40 < £100,000).
- Tax for the year comes out far lower than a full £130K year would give, because the allowance is no longer withdrawn.
For high earners who take part of a year on SMP, restoring the personal allowance can mean a substantial reduction in the year’s tax bill.
8. Common mistakes
- Stopping pension contributions during SMP. Loses the asymmetric employer match. Stay enrolled, accept the small employee contribution.
- Not checking your tax code. If you have other income or a non-cumulative code, check it during leave and ask HMRC to revise it if tax is being over- or under-collected.
- Forgetting to file Self Assessment if normally required. Even with reduced income, if the employee is in SA, the 2026-27 return is still due 31 January 2028. Any over- or under-payment is settled through the return.
- Treating KIT day pay as a “free” payment. Pay agreed for a KIT day goes through payroll like any other pay.
- Not coordinating with childcare benefits. Universal Credit / Tax Credits / Childcare Costs in Universal Credit all use current income. SMP-period drops can trigger or increase support — but the income recovery on return can cause clawback. Run the Take-Home Pay Calculator at multiple income points.
If you’re the partner rather than the birth mother, see our guide to Statutory Paternity Pay 2026/27 — it covers the new day-one right to paternity leave and how Shared Parental Pay lets couples split the time off.